Paper trading is simulated trading with live market prices but no real money, where orders, fills, and profit-and-loss are tracked as if they were real. The name survives from the era when practice trades were literally recorded on paper.
It is the standard way to learn a platform, rehearse order entry, and forward test a strategy without tuition paid to the market. Because prices are live, paper trading happens at real speed — which makes it honest about how often setups appear, but slow for building a statistically useful sample.
Its known limitation is psychology and fills: simulated orders never move the market, rarely model slippage well, and risking nothing changes behavior — traders hold losers and size up in ways they would not with real money. Treat paper results as evidence about the strategy, not about the trader, and confirm with small live size before scaling.